In a surprise move, mortgage interest rates rose this past week while NAR reports indicated that median home prices were rising as well.
Mortgage interest rates rose a bit this week, but not enough to make a meaningful difference in the price you’ll pay to own a home. When you’re talking about a 30-year fixed rate mortgage for well under 4 percent, a tenth of a point here or there doesn’t mean much over the long run.
You’d think the news about mortgage interest rates hanging out at 60-year lows would be enough to kick start the housing market. And, in a way, it has started to generate a little buzz.
The National Association of Realtors (NAR) announced this week that median home prices rose in 110 out of 147 metro areas in the second quarter of 2012, which is a good thing. Except that the reason median home prices are rising is a lack of inventory (i.e. homes for sale) at the lower price range.
(Median is the mid-point with the same number of homes selling above the price point as below. If the median home price rises, fewer lower-priced homes are being sold.)
“It’s most encouraging to see a growing number of metro areas with rising median prices, which is improving the equity position of existing homeowners. Inventory has been trending down and home builders are still under-producing in relation to growing demand,” said Lawrence Yun, NAR chief economist, in a press release announcing the findings. “Some of the improvement in prices is due to a smaller share of sales in low price ranges where inventory is tight.”
He believes home prices are set to rise in even more markets during upcoming quarters. CoreLogic, in its June Home Price Index, said housing prices rose 2.5 percent, on a year-over-year basis, though if you exclude distressed sales, home prices rose 3.2 percent during the same time period.
Still, when home prices rise, it’s good news for lenders, sellers and especially underwater homeowners.
An estimated 750,000 to 1 million homeowners may now have positive equity in their homes, according to the latest data from the Department of Housing and Urban Development (HUD) and CoreLogic. CoreLogic reported that in the first quarter of 2012, just 23.7 percent of all homeowners with a mortgage were underwater, compared with more than 25 percent in the fourth quarter of 2011.
But does all this mean the housing crisis is over? That housing market has finally hit rock bottom and is now heading up? The outlook is less clear.
For one thing, the number of homeowners who are behind in their mortgage payments or who were in foreclosure rose in the second quarter, according to the latest figures from the Mortgage Bankers Association.
About 11.9 percent of all mortgages on single family homes, townhomes, condos and multi-family buildings up to 4 units are delinquent in their payments or are in foreclosure. That number is down from 2011, but ticked up slightly from 11.8 percent at the end of March.
According to the Mortgage Bankers Association chief economist Jay Brinkmann, those numbers are consistent with the slowing of the economy.
And the number of foreclosures that are available for sale is set to rise again, after several months of decline. Once those properties go on the market, home prices in some of the hardest-hit areas could start falling again.
It all goes back to jobs and the unemployment level. At the heart of it, jobs and real estate are inextricably tied together. If you don’t have a job that pays the bills, you can’t pay your mortgage, and if you’re renting, you can’t buy a home. Until more people have better-paying jobs, we won’t see a real recovery in real estate.
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